Evidence of meeting #27 for Government Operations and Estimates in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was general.
A recording is available from Parliament.
4:55 p.m.
Conservative
Ben Lobb Conservative Huron—Bruce, ON
Obviously, the Veterans Affairs numbers are public numbers, with the pensions and everything else.
Would the wages at Veterans Affairs be calculated in the GDP number?
4:55 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes, they are.
4:55 p.m.
Conservative
Ben Lobb Conservative Huron—Bruce, ON
Would wages amongst non-military staff at DND also be calculated in this number?
4:55 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes. Operating expenditures at the Department of Veterans Affairs are also included for the purpose of the NATO definition.
4:55 p.m.
Conservative
Ben Lobb Conservative Huron—Bruce, ON
Would the money and weapons contributed to the Ukrainian effort this year be included in our commitment for the NATO spending?
4:55 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes, these numbers were also included in the NATO definition.
4:55 p.m.
Conservative
Ben Lobb Conservative Huron—Bruce, ON
I think also the federal government did some matching dollars to the Red Cross. Would that be included in our NATO spending as well?
4:55 p.m.
Adviser-Analyst, Office of the Parliamentary Budget Officer
It's difficult to say. There are elements of transfers from our government to other organizations that are counted, but we don't have a breakdown of that.
4:55 p.m.
Conservative
Ben Lobb Conservative Huron—Bruce, ON
For, say, the United Kingdom and also Poland, which would be two of the more significant countries that actually meet their targets, was any analysis done to see how they were able to achieve their 2% number?
4:55 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We looked at the gap between what Canada spends and how much it would need to spend to get to 2%. We did not look at how other countries that have already met or surpassed that target reached it.
4:55 p.m.
Conservative
Ben Lobb Conservative Huron—Bruce, ON
The other one is the analysis of delays. Obviously the F-35 is 2025, potentially. We've had some witnesses appear before committee on NORAD and some of the stuff they're looking to spend money on is not even.... I guess you could say it's in development, but you certainly couldn't buy it today.
What are the risks? As we move out in a number of years, the percentage of actual equipment is going to decrease and the amount of labour spending is going to be a larger percentage as we continue to move forward.
5 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
When there are delays in procurement, there are two big risks. The first risk is that there are amounts that are unspent and that get carried forward and forward. Eventually, that may lead to a big amount that remains to be spent after a certain period of time.
The other risk when there are delays is that costs increase. These pieces of equipment, these warships or fighter jets, become more expensive because of inflation. As some of your colleagues have mentioned, there is, at times, inflation in certain sectors, notably military procurement, that can be higher than general inflation, so the risk of that is cost increases.
5 p.m.
Conservative
The Chair Conservative Robert Gordon Kitchen
Thank you, Mr. Lobb.
We'll now go to Mr. Bains for five minutes.
5 p.m.
Liberal
Parm Bains Liberal Steveston—Richmond East, BC
Thank you, Mr. Chair.
Thank you to our witnesses for coming.
I would also like to thank my colleague for the very important land acknowledgement. I'd also like to recognize that my questions are coming from the traditional territories of the Musqueam and the Coast Salish peoples.
National Defence reports that it introduced a new funding model, the capital investment fund, in 2017 that allows for flexibility to adapt the annual capital funding levels to align with the actual funding requirements of the projects. Can you describe how this new model works?
5 p.m.
Adviser-Analyst, Office of the Parliamentary Budget Officer
It's a very good question. I would think it's best directed to the ministry in question. I have not worked directly with the CIF, the capital investment fund.
Thank you.
5 p.m.
Liberal
Parm Bains Liberal Steveston—Richmond East, BC
Would the same question be directed to the ministry? How does it help the government pay for complex multi-year projects?
5 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes, I think that officials at the Department of National Defence would be in a better position to explain the complex workings of an envelope.
As a complement to that, I worked as a public servant in the Department of Finance and in the Privy Council Office, and it was always challenging to figure out how much was left in the capital envelope at the Department of National Defence because of the multiple projects that are funded by these envelopes and the regular or frequent re-profiles that complex procurement projects encounter.
For these reasons, I think the Department of National Defence would be in a better position to answer your question as to how exactly it works.
5 p.m.
Liberal
Parm Bains Liberal Steveston—Richmond East, BC
Can one of you maybe explain how funding could lapse as opposed to funding being re-profiled to future years?
5 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
A lapse is usually an appropriation or an amount of funding that has been approved by Parliament that is not used and expires at the end of the year, whereas a re-profile is an amount of funding that has been approved and for which authority already exists or has been granted to not lose that but re-profile it, postponing its use to the subsequent year or years. That's what we call a re-profile, whereas a lapse is something that does not get used and is lost.
5 p.m.
Liberal
Parm Bains Liberal Steveston—Richmond East, BC
Your report mentions that one of the shortcomings of NATO's GDP targets that assess member states' military capacity is that the ratio will vary based on factors unrelated to defence capacity, for example, inflation, exchange rates and economic conditions.
Is there a way that we can account for or otherwise see past these variables when we assess our NATO target spending in the future?
5 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It's true that there are a number of factors, as you mentioned, that can affect the ratio and the overall perception of military readiness; however, having defence spending as a proportion of GDP is probably the easiest way to compare countries amongst themselves to get a sense of the order of magnitude of their effort related to defence spending. It is not a perfect metric, of course, because, as we have discussed, a country can spend a lot of money in specific areas without making that country's military more efficient or more effective at accomplishing its mission.
For that reason, I think NATO is keen on using defence spending as a share of GDP to compare countries amongst themselves when it comes to one aspect of military expenditures and effectiveness, but it's by no means the best or the only way to measure military expenditures.
5:05 p.m.
Liberal
5:05 p.m.
Conservative
The Chair Conservative Robert Gordon Kitchen
Thank you, Mr. Bains.
We will now go to Ms. Vignola for two and a half minutes.
5:05 p.m.
Bloc
Julie Vignola Bloc Beauport—Limoilou, QC
Thank you very much, Mr. Chair.
I have other questions for Mr. Giroux, but I would like to present a motion that was tabled within the required timeframe. I do not wish to take away from my colleagues' speaking time, so I propose that we discuss it in public, after the final round of questions, like we did last week or the week before. That way I will not prevent anyone from using their speaking time.
Is the committee agreeable to that?
5:05 p.m.
Conservative
The Chair Conservative Robert Gordon Kitchen
So that everyone is aware, I'll remind you that we have precedent, which we set out of respect for those who follow and may have questions. We allowed that to happen.
I'm looking around the room to see whether we have consensus on that. We had it last time, but I just want to be certain we do today. I see that heads are nodding yes.
Thank you very much. We'll move that to the very end.
With that said, Ms. Vignola, you have a minute left, but I would suggest you defer it to when we bring up your motion at the end.